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MySIPonline’s Experts Talk About the Benefits of Investing in Balanced Funds

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Balanced funds are the kind of funds which are considered less risky due to their mixed asset allocation to debt and equity. They are suitable for the defensive players in the investment ground who are either newbies or have a less risk-taking appetite.

There’s a different side of the coin too. The correction period right after the announcement of Budget 2018 brought in some major changes for the mutual fund investors. Although even that couldn’t overshadow the inclination of investors towards the equity market, it has affected some of the people who panicked at the moment, thus creating chaos in the industry concerning the category.

Giving equal weightage to both the aspects, we have had an interview with an expert panel of MySIPonline. They have provided their take on the issue that whether the investment in balanced funds is preferable or investors have other fascinating options to go with.

Why Are Balanced Funds an Ideal Choice for Investment?

Balanced or Hybrid funds are a mix of equity and debt mutual funds. The investment in such schemes is made in the ratio of 60 and 40. They are known to maintain their formula of income generation and capital appreciation. They are considered as an ideal choice for new investors in the industry and also the ones who have a less-risk appetite. In case you too belong to the category of investors whose motive is capital appreciation without taking on greater risk, Balanced Funds are designed particularly for you.

Tell Us About Some of the benefits That One Can Associate with This Category.

1. Out of the many advantages, the most basic one is that the investor gets diversification in a single mutual funds’ docket without crossing the hassle of selecting or analyzing every single equity and debt fund.

2. As we know the fund is managed by experienced personnel, thus daily monitoring process undertakes to decide the best course for the respective scheme.

3. These funds offer greater suitability to persons who are willing to invest a smaller portion of their income monthly.

4. An investment in such fund allows the investor to make systematic withdrawals while maintaining suitable asset allocation.

What Are the Different Categories of Hybrid/Balanced Funds?

As per the recent changes introduced by SEBI, there are a few amendments to the attributes of mutual funds. The balanced or hybrid funds are broadly classified into three sub-categories, which include:

Conservative Hybrid Funds: Here, the investment ratio is more inclined towards the debt instruments which is 75% and 90% of the total assets. However, the investment in equity & equity related instruments is between 10% and 25% of the total assets. The schemes that fall into this section are open-ended hybrid schemes which predominantly invests in debt instruments.

Balanced Hybrid Funds: In these funds, the investments in equity and related instruments, as well as the debt instruments, are made in between 40% and 60% of the total assets. No arbitrage is permitted in such schemes.

Aggressive Hybrid Funds: In such schemes, there is a higher inclination towards the equity part, thus making them ideal for investors with high-risk appetite. The investment in equity and equity-related securities is in between 65% to 80% of the total asset, whereas that of debt instruments is in between 20 to 30% of the total assets.

There was a Recent Crash Concerning the Balanced Funds. What was the Reason Behind it?

Balanced funds were known for their less-risky nature of investing. However, the period of crash depicted a different story altogether. Indeed, the phase was for a small duration; it made investors suffer from a rude shock. This happened because people opted for balanced funds in the hope of good returns with less exposure to risks. However, in the bid to generate excellent returns, some of the balanced funds increased their aggressiveness. This reflected in their equity-asset allocation which became closer to 75%. Further, the inclusion of riskier mid-cap stocks and increased exposure to cyclical sectors instead of defensive ones added fuel to the fire. These changes became their reasons for higher fall.

To top it all, the debt part which was supposed to cushion the market volatility too seem to have played a massive role in worsening the situation. Concerns such as fiscal deficit and depreciation in the value of rupee lead to the fall in the debt market.

However, this short-term phase can be considered a blessing in disguise as it provided investors with some key lessons.

What Should an Investor Do to Avoid Such Cases in the Future? What Can be the Right Approach to Pick a Balanced Fund?

It is essential to remain stick to their investment objective when vesting in any fund. Staying committed to the motive with which the investor started off at the first place is the only strategy to earn desirable returns. Besides, itâ’s good to go with large-cap oriented balanced funds and avoid schemes with excessive exposure to mid-caps.

When investing in balanced funds, one shouldn’t ignore the debt part entirely and should trust the fund manager. Further, with the changes that SEBI has introduced, there will be no aggressiveness or bias towards any instrument. Thus, investors will have transparency with which they can pick up only that scheme which serves their investment objective.

What Are the Perks of Investing in Balanced Funds via MySIPonline?

MySIPonline is an automated investment platform which offers several add-on features and ease of investing in mutual funds to its clients. Features that an investor can enjoy are:

Simple Online Access: The online portal is famous for its smooth procedure of investing in various mutual funds including balanced funds. One can easily access one’s investment through the dashboard and make changes to the portfolio at any point in time from anywhere. The user-friendly mobile app is another factor which can help investors to experience smooth transactions.

Smart Investment Process: The entire portal is built in a manner so that all types of investors can access it and invest in suitable funds considering their specific needs. The platform is even easy to operate for the investors who are not acquainted with the financial terminologies.

Selective, Safe, and Secure Investments: The online platform is registered with Association of Mutual Funds in India (AMFI) under ARN 106881. It offers safe transaction of investments in the balanced funds of more than 40 top AMCs in India. It also conducts in-depth study to find out the best-performing balanced funds out of all others.

We hope you have got clarity on what these balanced funds are and what all they can do for you. It’s time to include a reliable balanced fund to your portfolio. In case you wish to seek suggestions or help in doing so, connect with the experts available at MySIPonline.

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